CONFORMED COPY LOAN NUMBER 4043 IND LOAN NUMBER 4043 IND

Transcription

1 Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 4043 IND Loan Agreement Public Disclosure Authorized (Higher Education Support Project - Development of Undergraduate Education) between REPUBLIC OF INDONESIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized Public Disclosure Authorized Dated August 12, 1996 LOAN AGREEMENT LOAN NUMBER 4043 IND AGREEMENT, dated August 12, 1996, between REPUBLIC OF INDONESIA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; and WHEREAS (B) the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth below (the General Conditions) constitute an integral part of this Agreement: (a) The last sentence of Section 3.02 is deleted. (b) The second sentence of Section 5.01 is modified to read:

2 "Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made: (a) on account of expenditures in the territories of any country which is not a member of the Bank or for goods produced in, or services supplied from, such territories; or (b) for the purpose of any payment to persons or entities, or for any import of goods, if such payment or import, to the knowledge of the Bank, is prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations." (c) In Section 6.02, subparagraph (k) is relettered as subparagraph (l) and a new subparagraph (k) is added to read: "(k) An extraordinary situation shall have arisen under which any further withdrawals under the Loan would be inconsistent with the provisions of Article III, Section 3 of the Bank s Articles of Agreement." Section Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "BAN" means Badan Akreditasi Nasional, the Borrower s National Accreditation Board established by Ministerial Decree No. 0326/U/1994; (b) "CPCU" means the Central Project Coordination Unit established in the Secretariat of DPT, responsible for monitoring the Project and providing training and technical assistance to the LPIUs; (c) "DGHE" means the Directorate General of Higher Education in the Borrower s Ministry of Education and Culture; (d) "DPT" means Dewan Pendidikan Tinggi, the Borrower s Board of Higher Education (BHE) established by Ministerial Decree No. 0121/U/1996; (e) "Fiscal Year" and "FY" mean the Borrower s fiscal year commencing April 1 and ending March 31; (f) "Grant" means a grant made or proposed to be made by the Borrower, partly out of the proceeds of the Loan, to a Target University for a Sub-project (both as hereinafter defined); (g) "LPIU" means the Local Project Implementation Unit within each of the Target Universities, and "LPIUs" means the Local Project Implementation Units, collectively; (h) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (i) "Sub-project" means a specific development program to improve the quality of undergraduate education, the effectiveness of the educational process and the relevance of the study program offered, to be carried out by a Target University under Part A of the Project; and (j) "Target Universities" means the following six universities, namely, Universitas Bengkulu, Universitas Jember, Universitas Lampung, Universitas Nusa Cendana, Universitas Riau, and Universitas Sebelas Maret; and "Target University" means any one of the Target Universities. ARTICLE II The Loan Section The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, various currencies that shall have an aggregate value equivalent to the amount of sixty five million dollars ($65,000,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the date of such withdrawal. Section (a) The amount of the Loan may be withdrawn from the

3 Loan Account in accordance with the provisions of Schedule 1 to this Agreement (i) for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project (other than Part A thereof) described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan, and (ii) amounts paid (or, if the Bank shall so agree, to be paid) by the Borrower on account of Grants made under Part A of the Project and in respect of which the withdrawal from the Loan Account is requested. (b) The Borrower may, for the purposes of the Project, open and maintain in United States dollars a special deposit account in Bank Indonesia or in a state commercial bank on terms and conditions satisfactory to the Bank, including, in the case of a state commercial bank, appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 7 to this Agreement. Section The Closing Date shall be September 30, 2002, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank s investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. (iii) "Semester" means the first six months or the second six months of a calendar year. (d) On such date as the Bank may specify by no less than six months notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period."

4 "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) Quarter means a three-month period commencing on January 1, April 1, July 1 or October 1 in a calendar year." Section Interest and other charges shall be payable semiannually on March 1 and September 1 in each year. Section The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project through DGHE, with due diligence and efficiency and in conformity with appropriate administrative, educational, financial and technical practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Bank shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 5 to this Agreement. Section Except as the Bank shall otherwise agree, procurement of the goods, works and consultants services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section For the purposes of Section 9.08 of the General Conditions and without limitation thereto, the Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Bank, and furnish to the Bank not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, a plan designed to ensure the continued achievement of the objectives of the Project; and (b) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan. ARTICLE IV Financial Covenants Section (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and

5 (iii) furnish to the Bank such other information concerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank s representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Termination Section The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section of the General Conditions. Section The following addresses are specified for the purposes of Section of the General Conditions: For the Borrower: Ministry of Finance c/o Directorate General of Budget Jalan Lapangan Banteng Timur 2-4 P. O. Box 1139 Jakarta Indonesia Cable address: FINMINISTRY Jakarta Telex: DJMLN-IA DEPKEU-IA For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America

6 Cable address: Telex: INTBAFRAD Washington, D.C (MCI) (MCI) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF INDONESIA By /s/ Arifin M. Siregar, Ambassador Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Russell Cheetham Regional Vice President East Asia and Pacific SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works 400,000 80% under Parts B and C of the Project (2) Goods under 700, % of foreign Parts B and C expenditures, of the Project 100% of local expenditures (ex-factory cost) and 65% of local expenditures for other items procured locally (3) Training under Parts B and C of the Project: (a) Domestic 800,000 50% (b) Overseas 1,800, % (4) Domestic 5,600,000 50% fellowships under Part D of the Project

7 (5) Grants under 50,800,000 75% of Grant amount Part A of the Project (6) Studies under 1,600, % Part B of the Project (7) Project 1,100,000 50% management (8) Consultants 1,100,000 80% services (9) Unallocated 1,100,000 TOTAL 65,000,000 ========== 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; and (c) the term "Project management" means expenditures by the CPCU for administrative costs, including honoraria, consumable materials and travel. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. 4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures for: (i) civil works; (ii) contracts for goods costing less than $250,000; (iii) training, fellowships and Project management; (iv) Sub-projects under Grants; and (v) contracts for the employment of consulting firms valued at less than $100,000 equivalent each, and contracts for the employment of individuals valued at less than $50,000 equivalent each; all under such terms and conditions as the Bank shall specify by notice to the Borrower. SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower in improving the quality of undergraduate education, the effectiveness of the educational process and the relevance of the study programs offered, through provision of support for the first phase of the implementation of the Borrower s decentralization program for universities. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: Universities Development Program Strengthening undergraduate education at Target Universities through the carrying out of development programs to provide fellowships for teaching staff, training programs for teaching and administrative staff, provision of teaching and research grants, provision of technical assistance through visiting scholars, provision of books, journals, teaching materials, and equipment, and rehabilitation and upgrading of facilities.

8 Part B: Institutional Capacity Building in Higher Education 1. Development of the capacity of DPT to carry out its functions of assistance to DGHE in (i) overseeing the higher education system, by making recommendations on higher education policies, identifying local and national needs and new programs to be financed, and providing a medium- to long-term perspective to DGHE; (ii) providing competitive funding of research and graduate education; (iii) establishing competitive funding mechanisms for undergraduate education; and (iv) providing assistance to institutions of higher education to strengthen their capacity for academic planning and management; including the provision of technical assistance and equipment, staff training, and renovation of office space. 2. Carrying out of policy studies, including the carrying out of a comparative analysis of the remuneration and incentives structure for university teaching staff. Part C: National Accreditation System for Higher Education Strengthening of the capacity of BAN in establishing accreditation mechanisms and carrying out of accreditation of institutions of higher education and of study programs in such institutions, including the provision of technical assistance and equipment, staff training in management and program evaluation, and renovation of office space. Part D: Competitive Domestic Fellowship Program Provision of domestic fellowships for master s degree programs, on a competitive basis, to university teachers and to candidates for university teaching positions. * * * The Project is expected to be completed by March 31, SCHEDULE 3 Amortization Schedule Date Payment Due Payment of Principal (expressed in dollars)* March 1, ,260,000 September 1, ,305,000 March 1, ,350,000 September 1, ,400,000 March 1, ,445,000 September 1, ,495,000 March 1, ,550,000 September 1, ,605,000 March 1, ,660,000 September 1, ,715,000 March 1, ,775,000 September 1, ,840,000 March 1, ,905,000 September 1, ,970,000 March 1, ,040,000 September 1, ,110,000 March 1, ,185,000 September 1, ,260,000 March 1, ,340,000 September 1, ,420,000 March 1, ,505,000 September 1, ,590,000 March 1, ,685,000 September 1, ,775,000 March 1, ,875,000 September 1, ,975,000 March 1, ,075,000 September 1, ,185,000 March 1, ,295,000

9 September 1, ,410,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and Premiums on Prepayment Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.15 before maturity More than three years but 0.30 not more than six years before maturity More than six years but 0.55 not more than eleven years before maturity More than eleven years but not 0.80 more than sixteen years before maturity More than sixteen years but not 0.90 more than eighteen years before maturity More than eighteen years before 1.00 maturity SCHEDULE 4 Procurement and Consultants Services Section I. Part A: General Procurement of Goods and Works Goods and works shall be procured in accordance with the provisions of Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 and revised in January 1996 (the Guidelines) and the following provisions of this Section, as applicable. Part B: International Competitive Bidding 1. Except as otherwise provided in Part C of this Section, goods shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto. 2. The following provisions shall apply to goods to be procured under contracts awarded in accordance with the provisions of paragraph 1 of this Part B. (a) Grouping of contracts To the extent practicable, contracts for equipment shall be grouped in bid packages estimated to cost $250,000 equivalent or more each.

10 (b) Preference for domestically manufactured goods The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2 thereto shall apply to goods manufactured in the territory of the Borrower. (c) Notification and Advertisement The invitation to prequalify or bid for each contract estimated to cost $10,000,000 equivalent or more shall be advertised in accordance with the procedures applicable to large contracts under paragraph 2.8 of the Guidelines. Part C: Other Procurement Procedures 1. National Competitive Bidding (a) Goods estimated to cost less than $250,000 equivalent per contract may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines, provided, however, that under Parts B and C of the Project the aggregate amount shall not to exceed $1,000,000 equivalent. (b) Civil works shall be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. 2. National Shopping Goods estimated to cost less than $50,000 equivalent per contract may be procured under contracts awarded on the basis of national shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines, provided, however, that under Parts B and C of the Project the aggregate amount shall not to exceed $300,000 equivalent. 3. Direct Contracting Publications which are of a proprietary nature may, with the Bank s prior agreement, be procured in accordance with the provisions of paragraph 3.7 of the Guidelines. Part D: Review by the Bank of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to prequalify for bidding or to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods and works shall be undertaken in accordance with such procurement plan as shall have been approved by the Bank, and with the provisions of said paragraph Prior Review With respect to each contract for goods estimated to cost the equivalent of $250,000 or more, the first contract for civil works by each of the Target Universities, the first contract for civil works under Parts B and C of the Project, and the first contract for goods over $50,000 under Parts B and C of the Project, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II. Employment of Consultants

11 1. Consultants services shall be procured under contracts awarded in accordance with the provisions of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 (the Consultant Guidelines). For complex, time-based assignments, such contracts shall be based on the standard form of contract for consultants services issued by the Bank, with such modifications thereto as shall have been agreed by the Bank. Where no relevant standard contract documents have been issued by the Bank, other standard forms acceptable to the Bank shall be used. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts, shall not apply to (a) contracts for the employment of consulting firms estimated to cost less than $100,000 equivalent each or (b) contracts for the employment of individual consultants estimated to cost less than $50,000 equivalent each. However, said exceptions to prior Bank review shall not apply to (a) the terms of reference for such contracts, (b) singlesource selection of consulting firms, (c) assignments of a critical nature, as reasonably determined by the Bank, (d) amendments to contracts for the employment of consulting firms raising the contract value to $100,000 equivalent or above, or (e) amendments to contracts for the employment of individuals raising the contract value to $50,000 equivalent or above. SCHEDULE 5 Implementation Program 1. The Borrower shall maintain the Secretariat of DPT, including the CPCU, until completion of the Project, in accordance with terms of reference, staffing and resources, acceptable to the Bank. 2. The Borrower shall make Grants in accordance with the procedures and on the conditions set forth or referred to in Schedule 6 to this Agreement. 3. The Borrower shall: (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Bank, the carrying out of the Project and the achievement of the objectives thereof; (b) prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, by June 30 of each year, commencing June 30, 1997, and until completion of the Project, a report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the carrying out of the Project during the preceding year and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the year following such date; (c) prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, on or about June 30, 1999, a report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (d) review with the Bank, on or about September 30, 1999, or such later date as the Bank shall request, the report referred to in paragraph (c) of this Section, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Bank s views on the matter. 4. The Borrower shall:

12 (a) cause technical audits of Project implementation to be carried out, in a manner acceptable to the Bank, in each Fiscal Year during implementation of the Project; and (b) furnish to the Bank for comments as soon as available but not later than three months after the end of each such year, a copy of such audit. 5. In carrying out Parts B, C, and D of the Project, the Borrower shall carry out the training in accordance with training programs acceptable to the Bank. 6. In carrying out the comparative analysis referred to in Part B.2 of the Project, the Borrower shall: (a) not later than October 30, 1997, furnish to the Bank for comments the recommendations of the analysis; and (b) promptly thereafter, prepare and carry out an action plan taking into account the comments of the Bank on the recommendations. SCHEDULE 6 Procedures and Conditions for Grants under Part A of the Project 1. Each Grant shall be made by the Borrower only: (a) to a Target University which shall have established to the satisfaction of the Borrower, on the basis of criteria and procedures acceptable to the Bank, that said Target University has the organization, management, staffing and other resources required for the efficient carrying out of the Sub-project; and has prepared an acceptable plan for the carrying out of the Sub-project, and (b) for a Sub-project: (i) which is determined by the Borrower, on the basis of guidelines acceptable to the Bank, to be technically feasible and cost effective, and to have been designed in accordance with appropriate educational standards, and (ii) which has been reviewed and approved by the Bank. 2. Grants shall be made on terms whereby the Borrower shall obtain, through a single written agreement with each Target University, rights adequate to protect the interests of the Bank and the Borrower, including the right, as applicable, to: (a) require the Target University to establish, prior to the signature of the Grant agreement and, thereafter, maintain until completion of Part A of the Project, a LPIU, with competent staff in adequate numbers; (b) require the Target University to carry out and operate the Sub-project with due diligence and efficiency and in accordance with sound educational, technical, financial and managerial standards and to maintain adequate records; (c) require the Target University to maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Bank, the carrying out of the Sub-project and the achievement of the objectives thereof; (d) require that: (i) the goods, works and services to be financed out of the proceeds of the Grant shall be procured in accordance with the provisions of Schedule 4 to this Agreement, and (ii) such goods and services shall be used exclusively in the carrying out of the Sub-project; (e) inspect, by itself or jointly with representatives of the Bank if the Bank shall so request, such goods and the sites, works, plants and construction included in the Sub-project, the operation

13 thereof, and any relevant records and documents; (f) require that the Target University shall insure or make adequate provision for the insurance of the goods financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation. Any indemnity for such insurance shall be made payable in a currency freely usable by the Target University to replace or repair such goods; (g) obtain all such information as the Bank or the Borrower shall reasonably request relating to the foregoing and to the benefits to be derived from the Sub-project; and (h) suspend or terminate the right of the Target University to the use of the proceeds of the Loan upon failure by such Target University to perform its obligations under its agreement with the Borrower providing for the Grant. 3. When presenting a Sub-project to the Bank for review and approval, the Borrower shall furnish to the Bank a draft Grant agreement, in form satisfactory to the Bank, together with a description of the Subproject, including a description of the expenditures proposed to be financed out of the proceeds of the Loan, and such other information as the Bank shall reasonably request. SCHEDULE 7 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (8) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $5,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Bank shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $2,500,000 until the aggregate amount of withdrawals from the Loan Account plus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of $10,000, Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for deposit into the Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify.

14 (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Bank, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Bank shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, minus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount.

15 (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.